In today's highly competitive and complex corporate world, independent auditors must balance time and money spent insuring reporting accuracy with the need to provide to investors, managers, or government overseers, quality and control information for the financial transaction being audited. To accomplish this necessary quality and control, many accounting firms perform intermittent audits of selected records to ensure the substantial accuracy of the data presented on behalf of the company. In many cases, independent auditors perform year end audits after the period being audited has ended.
Based upon the entity's specific industry being audited, risk factors are identified. The independent auditor randomly identifies a sample set of records based upon the total population of records to be audited. The records are analyzed to determine the attributes of the total population of the database, which can then be examined with regard to the risk factors. For example, for an auditor that is auditing a Real Estate entity or section of an entity, a sample set of records is pulled regarding specific notes receivable amounts. The on-line or electronic value for the sample notes receivable are recomputed and/or are computed through the term of the note, thus simulating the remaining value of the note. The hard copy (paper copy) is then pulled and compared to the simulated data. A comparison is performed to determine the accuracy of the data with regard to the actual hard copy files. Further, a sampling of notes receivable in default over a specified term frame can be analyzed in a similar fashion. Once the entire sample has been analyzed, a statistical analysis of the findings from this series of samples results can be performed and the results are then applied across the total population of records to determine the projected number of errors, risks associated with the records, and materiality of such risks.
This approach to auditing began once the number of transactions for corporations exceeded an amount capable of realistic evaluation in an efficient time. With the advancement of computers, the ability to perform auditing through a statistical sampling of the records has increased in efficiency; however, the general premise of auditing samples has continued.
In U.S. Pat. No. 6,311,166 entitled “Method for Analyzing Effectiveness of Internal Controls in a Model of an Accounting System,” dated Oct. 30, 2001 and issued to Robert A. Nado et al., a method for providing for assessment of control is disclosed. A method is provided for assessing control risks in a model based reasoning system used for analyzing financial accounting systems by decomposing and quantifying the risk factors in the model so that the risk factors can be used to determine areas in the accounting system for sufficient controls lacking and to determine which controls are key and thus, should be subject to detailed testing. Factors quantified are failure impact risk, failure coverage risk, allowable risk, control detection risk, control strength, control defeat factor, attenuation factor, and control contribution. The present invention is used to enhance a hierarchical flow chart generating system, such as the Comet system, by providing risk analysis operative on a particular class of hierarchical structured flow charts. (Abstract) However, this method is another variation of a sampling analysis.
In U.S. Pat. No. 5,666,524 entitled “Parallel Processing Systems for Traversing a Transactional Database,” issued on Sep. 9, 1997 to Douglas F. Kunkel et al., a method of traversing a large database based upon user defined criteria computing information from the database based upon user defined criteria and providing information in the user specified format is disclosed. This invention discloses a parallel processing system provided which traverses logical records of events or transactional database contained in two or more physical files in accordance with one or more viewed definitions specified by the user. Each view definition includes a set of processing parameters and may reference one or more of the physical files. While one or more view definitions are transformed into entries of a logic table, the logic table including a plurality of sets, each set corresponding to a respective physical file and containing entries corresponding to the view definitions which reference its respective physical file. Each set of the logic table is transformed into machine code instructions from a separate thread of the parallel processing system. Each thread operates on its respective physical file and parallel with one or more of the other threads to traverse the physical file to retrieve information based on the view definition corresponding to the thread and stored the retrieved information and extract files designated by the view definition and performs design by the view definitions. (Abstract)
Neither of these patents address the need for a more complete monitoring and testing of transactions throughout a designated period. Therefore, any improvement in the ability to provide continuous assurance of the transaction records of a corporation without incurring excessive expense would be greatly beneficial.